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After revising the base year and changing the definition of gross domestic product, the government will on Thursday revise the base year for Consumer Price Index (CPI) and announce the January numbers. CPI will now have 2012 as the base year instead of 2010. Weights of various items in CPI would be based on the consumption expenditure survey of 2011-12, against 2004-05 used at present.
As a result, food & beverages, fuel & light will have less weight; housing (rent), clothing and footwear will have higher. This means the falling oil prices will now have less impact on CPI-based inflation. Similarly, if food inflation is high, it would not inflate CPI-based inflation as fast as it does now. These figures assume importance as the Reserve Bank of India bases its policy stance on retail inflation
